Look out Below

For a while now, I have been suspect of the rally in the stock indexes. Go back and read my last few entries. I am not calling for the end of the world but its interesting how, as soon as CNBC, GMA, and your local TV anchor start touting the return to 13,000 in the Dow as a sign that “Happy Days are Here Again”.. the market steps in with a combination of leather face, Jason from Halloween, and the shark from Jaws in order to deliver some pain to the bulls.

Last week, I also did a report from the floor on the grains. I had 1333 as the resistance in SK which looked like a good sale. At the time we were trading at 1312 or so. We traded up to a high of 1336 yesterday and currently we are on our heels, trading back at 1320.

News out from China and Greece today once again has flamed the fans of worry. If China slows down and Greece sets off the domino effect of European defaults, the US could have a flush down with them over the next several months. Ironically, this will co-incide with the season of Presidential hatred and mudslinging.

If we got gas down to 2.50 in the USA, that, would not necessarily be a good thing for your economy. Gas goes up as demand goes up. Healthy economies demand gas. Sick world economies need less gas. Less demand means lower prices. Period.
It has absolutely nothing to do with who’s in the White House. No politician has been or ever will be born who’s words and rhetoric could overpower the law of supply and demand.

Ok, so what to do?
Manage your shorts with good buy stops. Ensure that winning shorts do not turn into losses. At worse, you should have a scratch from any current winning shorts.
If you took my advice and bought cheap out of the money S&P options, then sit tight.
Look for a spot to sell some premium against your shorts to pull money out that way.

Downside target for S&P Cash? 13.11, 12.90 and 12.70
Downside target for the Dow futures? 12,516 and then 12,353.

Downside target for SK 12.70 and then 12.50
Downside target for CK 6.41 and then 6.33
Downside target for WN 6.53 and 6.47 and then 6.28

Have a good day

1 thought on “Look out Below

  1. it’s a great call. I always believe it even when mkt seemed holding on for a while. What I found ironical is that some people say the news about China was a trigger of worry. Well, people were calling for China to change its export-leading growth model, to balance int’l trade, blablabla. Setting a lower GDP growth target is a step in that direction but it’s now suddenly a reason to worry. Market(read ,people) surely is good at finding excuses and culprits for moves required by internal forces of market itself. Good call.

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